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Getting approved for loans for people on benefits seems tough. Major banks might reject your application, and many lenders require extensive paperwork. However, some loan companies are more flexible. If you have a consistent source of income, including certain benefits, you can still qualify for a loan.

Before applying, there are important questions to consider, like whether you can obtain Universal Credit loans. Or which benefits aren’t considered your income? What are the eligibility criteria? We provide answers to these questions and more to help you make an informed decision.

How to apply for a loan on benefits

Comparing secured loans on benefits is crucial to find the best terms and rates. Here are the steps to take during the application process:

1.

Compare loans

Look at various options and consider factors such as the APR (Annual Percentage Rate), monthly repayments, and the total amount to be repaid. This will help you find the most cost-effective loan.

2.

Choose a deal

Select a deal and provider that offers the best combination of APR, term length, and monthly payments. Ensure that the loan for people on benefits is affordable based on your financial situation.

3.

Fill out the application form

Provide your name, address, and bank details, along with a summary of your monthly income and expenses. Double-check all information for accuracy to avoid any issues during processing.

Loan calculator

What are you borrowing for?
How much would you like to borrow?
£

This helps you get a more accurate finance estimate

Borrowing
£16,000.00
Monthly repayment
£408.79
Total repayable
£24,527.68
Interest rate
19.9%
Length of Loan
60 months
Amount of interest
£8,527.68
Get results

Representative example

With a representative APR of 19,9% (fixed) for a £5,000 loan over 5 years, your monthly repayment would be £127.74, and the total amount repayable would be £7,664.40. Please note, the rate offered may vary based on your financial circumstances and loan amount.

Can you get a loan if you receive benefits?

Put simply, yes, it’s possible to get a loan on benefits, but it’s not guaranteed for everyone. Some lenders consider certain benefits regular income, which means loans are accessible to many benefit recipients. Long-term benefits like Disability Living Allowance may qualify you for different loan types than short-term benefits, with lenders offering specific borrowing options. However, eligibility will vary based on the lender, the types of benefits you receive, and your overall income situation.

Key factors influencing decisions for benefits loans are:

  • Whether you have a guarantor
  • The stability of your future income
  • Your financial history
  • Your credit score

So, the main consideration in terms of loans for people on benefits is income and whether they demonstrate that they can afford the loan repayments. Keep in mind that the options will be more limited than those for applicants with different income sources.

Which benefits count as income?

Certain benefits are considered regular income by lenders during the loan application process. The following benefits are recognised as income most often:

  • Personal Independence Payment (PIP) — Provided to individuals with long-term disabilities or health conditions to help with living costs.
  • Disability Living Allowance (now being replaced by Personal Independence Payments) — Previously offered to individuals under 16 who needed extra help because of a disability.
  • Working Tax Credit (or Universal Credit, its successor) — A payment for working people on low incomes to help with living and childcare costs.
  • Employment and Support Allowance (previously Severe Disablement Allowance or Incapacity Benefit) — Support for those unable to work due to illness or disability.
  • Industrial Injuries Disablement Benefit — Financial support for people who are ill or disabled because of a work-related injury or disease.
  • Child Tax Credit — Financial support for families with children to help with everyday costs.
  • Child Benefit — Regular benefit payments to help with the costs of raising children.
  • Fostering Allowance — Benefits payments to foster parents to help cover the costs of caring for fostered children.

The type of benefits you receive influences the availability of loan options. This list just provides a starting point. Remember that each lender’s specific criteria for the benefits accepted and your individual circumstances will ultimately determine whether you qualify.

Which benefits don’t count towards my income?

Some government benefits are generally not viewed by lenders as eligible income when they assess loan applications for individuals on benefits. These include:

  • Housing benefit — Intended to help cover rent payments for people with low incomes or those who are unemployed. Lenders view this as a subsidy for housing costs rather than income available for loan repayments.
  • Income support — Designed to provide financial support to individuals with low incomes who are unable to work, seen as temporary assistance.
  • Job seekers allowance — Supports people who are actively seeking employment. Lenders view this as uncertain income because it depends on the recipient’s job search activities and eligibility criteria.
  • Pension credit — Lenders perceive it as fixed and possibly insufficient for meeting regular loan repayments, especially for larger sums.

Receiving these benefits doesn’t automatically disqualify you from getting a loan. However, lenders often prefer applicants who have an additional qualifying form of income.

Can you get a loan on universal credit?

If you’re receiving Universal Credit and looking to get a loan, it depends on whether lenders view it as a regular income. Some lenders do accept these payments as income, but your choices for Universal Credit loans will be more limited than those for somebody with a steady job.

Keep in mind that loans designed for people on any kind of benefits (this includes any loan on Universal Credit) are different and often less favourable than those available to people with higher incomes from work.

You might want to learn about budgeting advances if you're on Universal Credit. These advances provide money to help cover unexpected expenses. You pay back the budgeting advance through deductions from your future Universal Credit instalments. For more information, check the Budgeting Advance section on the Gov.uk.

What are the eligibility criteria?

needs
To apply for a loan you needRequirements
Your personal details, such as your name and birthdateYou need to be at least 18 years old—some lenders may require you to be older.
Your bank account informationDemonstrating a steady income is crucial as it shows you can handle monthly repayments.
Your current address and addresses from the last three yearsAn active bank account is required for the loan transactions.
Details about your jobLenders will assess if you can comfortably afford the loan repayments without compromising your financial health.
You need to be a UK resident and have a permanent address

All it takes to compare loans is a bit of information about you and your finances.

Compare loans

How much can you borrow?

If you meet the eligibility requirements we talked about in the previous section, you can apply for a loan ranging from £100 to £10,000. This range allows you to choose an amount that meets your specific financial needs, whether it’s for covering immediate expenses or larger investments. Also, there is some flexibility in selecting a repayment period to make it work for your budget and financial capabilities.

Here’s how the repayment options break down based on the loan amount:

  • For loans under £1,000, you can opt for repayment terms of 3, 6, or 12 months, depending on what’s better for your financial situation. These are short-term loans.
  • Loans between £1,000 and £2,500 come with extended repayment periods. These range from 12 to 36 months and give you more time to manage larger sums.
  • If you borrow between £2,500 and £7,500, you can choose to repay over a period of 12 to 60 months. The larger the loan amounts are, the longer you’ll want to extend the repayment term.
  • Loans from £7,500 to £10,000 offer the longest repayment terms. These span from 18 to 60 months, which makes monthly payments more manageable over an extended period.

If you qualify, you can choose from these repayment options, but the amount you can actually borrow depends on more than just your choice. For example, for bad credit benefit loans, it’s uncommon for people claiming benefits to borrow at the upper range of the available amounts.

As usual, there will be consequences if you make a late repayment. So, when deciding on the amount, consider whether it could put you at risk of facing those consequences.

What are the pros and cons of benefit loans?

ProsCons
Accessibility — Loans for people on benefits are designed to be accessible for those receiving benefits, providing crucial assistance for individuals struggling financially.Higher interest rates — Due to perceived higher risk, these loans come with higher interest rates than traditional loans.
Credit building — Timely repayment of a benefit loan positively impacts your credit score, improving your credit profile over time.Additional fees — Some lenders impose setup fees or other charges. It's important to review the agreement to understand all costs involved.
Flexibility — Benefits loans often come with flexible repayment terms, allowing you to manage your finances more effectively.Limited options — Benefit loans offer fewer options compared to loans for individuals with "regular" income, limiting choices for lenders and loan products.
Tailored solutions — Lenders offering specialized loans understand the unique challenges and needs of borrowers on benefits, offering solutions to fit various financial situations.

When considering these loans, weigh up the pros and cons carefully. Compare offers from different lenders seriously because the terms can either improve or worsen the advantages and disadvantages of taking out a loan.

How to apply for a loan on benefits

While securing a loan on benefits is often challenging, the process follows a straightforward path. You start by completing an application form where you specify the loan amount and repayment period you prefer.

Lenders usually conduct a preliminary credit check, referred to as a soft check, to assess your eligibility without leaving a mark on your credit report. If your application meets the initial criteria, you’ll be connected with a lender who will guide you through their application process.

Regulated UK lenders must follow financial rules to make sure loans are affordable for borrowers, which includes loans for people on benefits. They look at your current financial situation, not just your credit file. For example, they will assess your income, including benefits, and your regular expenses on your financial record to see if you can comfortably repay the loan. They also consider your employment status, existing debts, and any other financial obligations.

Once approved, funds are transferred to your account promptly. You will then need to pay off the amount with interest as stated in the agreement.

If you don’t get approved, applying for a budgeting loan is an alternative option. Budgeting loans are for people who have been on benefits for at least six months. The loan gives you interest-free credit and can be used for household items, rent, and other necessary expenses.

Why compare loans for people with benefits through Moneyrepublic?

  • 1Identify the loans on benefits with the highest approval chances.
  • 2Receive loan options tailored to your specific needs.
  • 3Compare personal loans for people on benefits without impacting your credit score.

FAQ

Do I need a guarantor to get a loan on benefits?

You don’t always need a guarantor to get a loan on benefits, depending on the lender’s policies and your financial situation. It’s best to check directly with lenders to understand their specific requirements.

What loans can people on benefits get?

If you’re looking for loans for people on benefits, consider personal loans from certain lenders, guarantor loans with a co-signer, secured loans using property as collateral, or short-term payday loans. Each option has different eligibility requirements and advantages/disadvantages.

What loan terms are available?

Personal loans for people on benefits are typically paid back over between one and five years. Secured loans, which require collateral like property, can have longer repayment periods, spanning 10 to 20 years. Guarantor loans, similar to personal loans, generally have terms of 1 to 5 years.

Do benefits count as income for loans?

Yes, people who receive Universal Credit or disability benefits can state them as income when applying for a loan. Different lenders have different benefits loan policies; for example, which types of benefits they accept and how they assess them.

Can I get a loan on PIP?

Yes, some lenders count PIP as income when deciding if you qualify for a loan. It’s best to check with lenders to see their specific requirements for using PIP as income.